Is Winter coming for Prime London?
8th September 2017
Even the most optimistic property pundit will not be expecting the kind of gains made over the last twenty years to go on indefinitely. With locals excluded from the market unless their parents have deep pockets, the fortunes of capital values in our capital seem firmly aligned with the continuing popularity of London as an international property bank, property ownership as a pension and markedly low interest rates.
The government, with its ideal of a property owning democracy seem to be increasingly nervous about the state of affairs and hence the crackdown on overseas ownership through property vehicles, the raise in stamp duty for investors and the cutting of tax allowances for landlords.
All these moves must have an effect on the long term health of property - but is it going to be icy-bad? Personally we don't think so. The worst that will happen in the short term is that there will be much less property actually being sold and the shortage of supply will maintain prices (bad for us agents, not so bad for you property owners). Wage inflation may then give more people a chance to enter the market to make it more robust. The long term forecast in this city is always fair
Even if prices do take a dip caused by more people selling without the supporting demand, this will have a positive effect on rents and rental returns. Rents have been on the slide in real times for more than five years now, caused by too many landlords and not enough tenant demand. Should properties begin to sell then there will be less rental supply and more tenants needing a place to move. Rents will improve and so will the currently pitiful returns that landlords are experiencing. I am old enough (alas) to remember rental returns of 8% or 9%. Now to achieve 3% gross is doing well. If more properties are sold, this can only lead to an improvement in the letting prospects of a property and and more palatable rental returns.
So in conclusion it may get a little chilly for a while, but a long Winter of legend? That is the thing for fantasy stories.